David Darmanin
Realtors and analysts are in disagreement over whether the mushrooming of luxury apartments and their oversupply have jeopardised their prices.
International property news portal Globalpropertyguide.com recently used market figures published by the Central Bank of Malta in their report ‘Oversupply as Malta’s housing boom ends’, where they dissected the downward trend in local realty prices.
“With supply exceeding demand, there is now an over-supply. A third of the property stock is second homes, and 21% of all properties are empty,” the report reads.
Quoting figures issued by the Central Bank, which takes its data from questionnaires to members of the Federation of Estate Agents (FEA), the report says apartments “led the house price cash” with a 2.9% fall in prices up until the end of March 2008.
But the Property Price Index (PPI) issued by the National Statistics Office, reviewing the same period, does not tally with this statistic. The PPI claims apartment prices “are estimated to have increased by 8.62%” compared to January-March 2007.
Contacted by this newspaper, Sapphire Real Estate director Jane Chircop, who is also a member of the FEA, commented: “I don’t know about NSO figures, but the Central Bank is quoting very realistic data. At the end of the day, it is the realtors who supply the Central Bank with information, and we are the ones who are most in touch with the property market.”
The data compiled by both bodies however does not differentiate between luxury apartments and other common apartments. Luxury apartments tend to form part of massive developments and sold at rates to the tune of €600,000 or more, usually advertised abroad to target foreign investors.
Asked whether she foresees a price slump in this sector also, Chircop made no excuses about the market:
“Developers will never admit that their investment will go down in price, but I attend fairs abroad and most attendees are standard Europeans who are simply looking for a second home away from their country of residence. Those having the budget to buy luxury apartments in Malta are few and far between. To be able to afford purchasing anything within that range, especially if it’s a second home, you will have to be very, very rich. Besides, there is too much supply in Malta.”

Speculation galore
But even most luxury apartment units – such as those mushrooming all over the Tigné peninsula – are often sold as soon as they are put on the market, Chircop is eager to burst this bubble too:
“A huge portion of those buying such property would be speculators, some of them agents. They are bought on a promise of sale agreement, and if they don’t resell the property in a certain timeframe, the buyers lose their deposit and the developer loses the sale.”
Asked point blank whether she expects prices for luxury apartments to go down, Chricop said: “It’s either that or speculators will end up having to give up their deposits and vacate. My advice is to never buy property on plan: there is no money to be saved on this method of purchase.
“This type of selling is primarily done because developers need all the money they can get to carry on works on the property, and because it’s good marketing. But a lot of buyers have had problems, just look at all the court cases. In any case, luxury apartments in Malta are so expensive that with our prices we can hardly compete. We have almost come to a point where spending money to participate in fairs has become a waste of money.”
But Federation of Estate Agents President Trafford Busuttil not only disagrees with Chircop, but is positive prices within this sector will actually incur an “upward adjustment” because he says, invoking the hackneyed property mantra, “property is all about location, location, location. Personally I would rather own a stone in a good location than a castle in a bad one.”
Busuttil even dismisses the Global Property Guide’s report. “The author of this article must have his numbers wrong.”
But then, even international estate agents Knight Frank claim property prices have declined by 2.7%.
Bernards Real Estate managing director, Bernard Bugeja, agrees with Busuttil: “Most vacant properties are more run-of-the-mill properties ranging between €100,000 and €125,000. Luxury units are either being occupied or have been bought as an investment. I think the trend is moving towards an increase in prices at the high end of the market.”
With regards to oversupply of luxury apartments, Bugeja said this is a mere misconception. “I don’t think that it is the case that we are oversupplied, but rather the opposite: 70% of luxury projects are normally sold within a relatively short period of time when they are released on the open market. I think we need more and more of such projects.”

Critical angle
But when drawing a comparison with trends in other countries, independent market analyst Mark Lamb says Malta “is not immune to global realities” affecting property prices.
“Whilst some local commentators argue that the Maltese property market is quite different from those which are experiencing significant falls in property prices around the world such as America, UK, Ireland and Spain it must be noted that other densely populated countries are also being negatively affected,” he said.
“Take Singapore for example. It is surrounded by the sea, has limited building land available (it is actually more densely populated than Malta) while foreigners also account for a high percentage of its annual property sales – just over 25% of all property sold in Singapore was to foreigners last year. Over recent years construction in Singapore has boomed while property prices have soared,” adding that according to data from Savills Singapore, the country’s priciest apartments suffered a dip in price of 2.9% in the first quarter of this year.
“Obviously, if this trend continues their luxury apartments will fall in value by over 11.50% this year alone whilst a separate report by Citigroup predicts luxury apartments in Singapore are likely fall by 20% to 30% from their peak as high-end homes become the first to buckle under the pressure of volatile market conditions and gloomy buyer sentiment.”

ddarmanin@mediatoday.com.mt